background image
Note: This Treaty may be impacted by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI). MLI impact on Tax Treaties is available with the Orbitax International Tax Research & Compliance Expert.

ARTICLE 11

Interest

(1) Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

(2) However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent of the gross amount of the interest.

The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation.

(3) Notwithstanding the provisions of paragraph (2), interest arising in a Contracting State and beneficially owned by a resident of the other Contracting State shall be taxable only in that other State if such interest is paid:

  • (a) to the Government of the other Contracting State, including any political subdivision or local authority thereof, or
  • (b) to the Central Bank of the other Contracting State or to the representation of the Central Bank of that other State situated in that State, or
  • (c) as may be agreed between the competent authorities of the Contracting States, to any institution owned or controlled by the Government of the other Contracting State if the purpose of the existence of such an institution is the promotion of export, or
  • (d) in connection with any loan or credit guaranteed:
    • (i) by the Government of the other Contracting State, including any political subdivision or local authority thereof, or
    • (ii) by the Central Bank of the other Contracting State or by the representation of the Central Bank of that other State situated in that State, or
    • (iii) as may be agreed between the competent authorities of the Contracting States, by any institution owned or controlled by the Government of the other Contracting State if the purpose of the existence of such an institution is the promotion of export.

(4) The term ”interest” as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purposes of this Article. The term ”interest” shall not include any item of income which is considered as a dividend under the provisions of paragraph (3) of Article 10.

(5) The provisions of paragraphs (1), (2) and (3) shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

(6) Interest shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

(7) Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.